Supporting Aspirations: Education Loan Interest Relief Scheme

Introduction

Interest subsidy scheme for education loan is a scheme that allows students from economically weaker sections or minorities to claim interest on their loans from the government. The loans are provided by scheduled banks without collateral security. The subsidy is available for a first undergraduate degree or first post-graduate diploma courses in India or abroad. The maximum loan amount is up to Rs 7.5 lakh. The scheme is not applicable for students who discontinue the course or are expelled. The family income of the students should not exceed Rs 3 lakh for general courses and Rs 4.5 lakh for technical and vocational courses.

There are three subsidy schemes available for education loan which are detailed below:

1. Central Scheme to provide Interest Subsidy to Educational Loan (CSIS): The scheme is applicable for “Study in India” only. If a course is pursued partly in India and partly abroad, the same is not eligible for subsidy. The scheme benefits all categories of economically weaker students for pursuing professional/ technical courses in India and intends to provide affordable higher education.
2. Padho Pardesh Scheme of Interest Subsidy for Education Loans: The scheme is for students of minority communities (Muslims, Christians, Sikhs, Buddhists, Jains and Parsis) to study abroad. The scheme covers approved courses at Masters, M.Phil. and Ph.D. levels abroad.
3. Dr. Ambedkar Central Sector Scheme of Interest Subsidy for Educational Loans: The scheme is for Other Backward Classes (OBCs) and Economically Backward Classes (EBCs) to pursue education abroad. The scheme covers approved courses at Masters, M.Phil. and Ph.D. levels abroad.

Benefits of interest subsidy scheme for education loan

The benefits of interest subsidy scheme for education loan are:

1. The students do not have to pay any interest during the moratorium period, which is the duration of course plus one year or six months after getting a job, whichever is earlier.
2. The subsidy reduces the outstanding principal amount of the loan and makes the repayment easier and faster.
3. The subsidy helps the students to pursue higher education without any financial burden.

Eligibility Criteria of interest subsidy scheme for education Loan

The eligibility criteria of interest subsidy scheme for education loan vary depending on the type of scheme, course, and category of the student. There are three subsidy schemes available for education loan which are detailed below:

1. Central Scheme to provide Interest Subsidy to Educational Loan (CSIS): The scheme is applicable for “Study in India” only. If a course is pursued partly in India and partly abroad, the same is not eligible for subsidy. The scheme benefits all categories of economically weaker students for pursuing professional/ technical courses in India and intends to provide affordable higher education.
2. Padho Pardesh Scheme of Interest Subsidy for Education Loans: The scheme is for students of minority communities (Muslims, Christians, Sikhs, Buddhists, Jains and Parsis) to study abroad. The scheme covers approved courses at Masters, M.Phil. and Ph.D. levels abroad.
3. Dr. Ambedkar Central Sector Scheme of Interest Subsidy for Educational Loans: The scheme is for Other Backward Classes (OBCs) and Economically Backward Classes (EBCs) to pursue education abroad. The scheme covers approved courses at Masters, M.Phil. and Ph.D. levels abroad.

The family income of the students should not exceed Rs 3 lakh for general courses and Rs 4.5 lakh for technical and vocational courses. The family income limit may vary depending on the category of the student and the type of scheme.

Maximum Loan amount for interest subsidy scheme

The maximum loan amount for interest subsidy scheme depends on the type of scheme, course, and category of the student. There are three subsidy schemes available for education loan in India, which are:

1. Central Scheme to provide Interest Subsidy to Educational Loan (CSIS): The maximum loan amount under this scheme is Rs. 10.0 lakh. This interest subsidy is admissible only once either for undergraduate or post-graduate or integrated course. Interest charged on loans sanctioned without any collateral security & third-party guarantee and for a maximum amount of Rs 10 lakhs, will be eligible for interest subsidy benefits under the scheme.
2. Padho Pardesh Scheme of Interest Subsidy for Education Loans (PPIS): The maximum loan amount under this scheme is not specified, but the family income of the students should not exceed Rs. 6 lakh per annum. The scheme is for students of minority communities (Muslims, Christians, Sikhs, Buddhists, Jains and Parsis) to study abroad. The scheme covers approved courses at Masters, M.Phil. and Ph.D. levels abroad.
3. Dr. Ambedkar Central Sector Scheme of Interest Subsidy for Educational Loans (ACSISOBCEBC): The maximum loan amount under this scheme is not specified, but the family income of the students should not exceed Rs. 3 lakh per annum for OBCs and Rs. 1 lakh per annum for EBCs. The scheme is for Other Backward Classes (OBCs) and Economically Backward Classes (EBCs) to pursue education abroad. The scheme covers approved courses at Masters, M.Phil. and Ph.D. levels abroad.

Moratorium Period for education Loan

The moratorium period is a term that is related to education loans. It is the time period during which the student borrower does not have to repay the principal amount of the loan. The moratorium period usually includes the duration of the course plus six months or one year, depending on the lender. The moratorium period allows the student to complete their education and find a suitable job before starting the repayment of the loan.

However, the moratorium period is not interest-free. The interest on the loan is calculated and added to the principal amount during this period. The student can choose to pay the interest during the moratorium period or defer it till the repayment starts. If the student pays the interest during the moratorium period, they can get a concession in the interest rate from some lenders. The moratorium period can also affect the EMI amount and the total payment of the loan.

You can use the online education loan EMI calculator5 to find out how different moratorium periods and interest rates affect your loan repayment. You can also check your eligibility and apply for various subsidy schemes that can reduce your interest burden on education loans.

How to apply for interest subsidy scheme for education loan? 

You can apply for interest subsidy scheme for education loan online through the National Scholarship Portal. You have to register yourself on the portal and fill up the application form with the required details. You also have to upload the necessary documents such as income certificate, caste certificate, admission letter, etc. You can also track the status of your application on the portal.

Alternatively, you can also use the Pradhan Mantri Vidya Lakshmi Karyakram portal to apply for educational loan to multiple banks or schemes using a single form.

You can also contact your bank or visit the links provided in the results for more information on these schemes.

Processing time for interest subsidy scheme for education Loan

The processing time for your application may vary depending on the type of subsidy scheme, the bank, and the verification of your documents. According to some sources, it may take up to 15 days to process your application for the Central Scheme of Interest Subsidy for Education Loan (CSIS). However, this may not be the same for other schemes or banks. You can check the status of your application online through the National Scholarship Portal or contact your bank for more information.

Conclusion

Interest subsidy scheme for education loan is a beneficial scheme that helps students from economically weaker sections or minorities to pursue higher education without any financial burden. The scheme provides full interest subsidy during the moratorium period, which is the duration of course plus one year or six months after getting a job, whichever is earlier. The scheme covers various courses in India or abroad, depending on the type of scheme and category of the student. The interest subsidy scheme for education loan is a great opportunity for students to achieve their academic dreams and goals.

Frequently Asked Questions (FAQs)

Q1: What is the Interest Subsidy Scheme for Education Loans?

A1: The Interest Subsidy Scheme for Education Loans is a government program designed to provide financial relief to students by subsidizing the interest on their education loans. It aims to make higher education more affordable.

Q2: Who is eligible for the interest subsidy under this scheme?

A2: Typically, eligible candidates include students from economically disadvantaged backgrounds pursuing higher education. Specific eligibility criteria may vary depending on the government’s guidelines and the lending institution.

Q3: How does the interest subsidy work?

A3: The scheme covers a portion or the entire interest accrued on the education loan for a specified period, making it more affordable for students. The subsidy is often based on income criteria and academic performance.

Q4: Can I apply for the interest subsidy after I’ve already taken out an education loan?

A4: In some cases, you may be able to apply for the subsidy after taking out the loan, but it’s essential to check with the relevant authorities or your lending institution for their specific policies and deadlines.

Q5: What is the application process for the interest subsidy?

A5: The application process varies from one region to another and may involve submitting income documents, academic records, and other necessary paperwork. Contact your lending institution or the designated government agency for detailed instructions.

Q6: How long does the interest subsidy last?

A6: The duration of the interest subsidy often depends on the specific terms of the scheme and the level of education you are pursuing. It can range from a few years to the entire loan repayment period.

Q7: What happens if I don’t meet the scheme’s eligibility criteria anymore?

A7: If your financial situation or academic performance no longer meets the eligibility criteria, you may lose the interest subsidy benefit. The loan will then accrue interest at the regular rate.

Q8: Is the interest subsidy applicable to loans for both undergraduate and postgraduate courses?

A8: The eligibility for the subsidy can vary, but it often applies to both undergraduate and postgraduate courses. Check the scheme’s guidelines to confirm eligibility for your specific educational level.